Archive

December 23, 2016, Vol. 34, No. 24

Reasonable Nutjob Caucus

To the anarchist Pierre-Joseph Proudhon, a certain French legislature was a "box of matches." We judge that a Trump fiscal appointment meaningfully boosts the chances of political conflagration in the new administration.

Wrong number

A certain vendor of an indispensable 21st century communications service loses money, piles on leverage and underinvests in its capital stock. Still, its bond prices rally and its share price levitates. Yield-grubbing in a bull market.

Can make it anywhere

Out of the kitchen

Beleaguered by eight years of weaponized regulation, the dining-out industry sees a new day dawning. What am I to bid for a like-new, high-end commercial stainless steel 2-bay steam table with drain and storage shelf?

China being China

December 9, 2016, Vol. 34, No. 23

Central bank of many time zones

"America First" is Donald Trump's moto, but it could just as easily be Janet Yellen's. How foreign events will color American monetary policy in ways that the Fed chair, the president-elect and even Mr. Market may not yet anticipate.

Don't say they didn't warn you

November 25, 2016, Vol. 34, No. 22

It’s G. William Miller time

Spring training for the Trump administration feels like exhibition baseball under the Florida sun. Pending the start of real competition, optimism is irrefutable. Anything seems possible. A speculation on the next four years in monetary policy.

Redheaded stepchild REIT

Put aside the adage, “Buy the best building on the worst block.” We here propose the purchase of OK buildings on a terrible block. Anyway, who needs analyst coverage, an annual report, a dividend or a 10-Q?

Dept. of foresight

Contain your enthusiasm

Years of ultra-low interest rates have facilitated the cartelization of a certain branch of American industry. Rarely have its profits been so high. And rarely has it been so overvalued. An eagle eye on the soaring dollar.

This is your government: Stick ‘em up.

November 11, 2016, Vol. 34, No. 21

Tinker to Evers to Chance – to us

The 20th-century Chicago Cubs required fewer than 90 minutes to put away the Detroit Tigers in the fifth and final game of the 1908 World Series. A funny thing is human progress, in money no less than in baseball.

Muni fun facts

Banking on Turmoil

Imagine a capitalist island set down in a communist sea. Recall the American real-estate bubble of the mid-2000s. Observe the mighty Swiss franc. Thus imagining, recalling and observing, you understand the vulnerability of a certain top-tier bank.

No yield for you

Kicking the can

Hundreds of companies used to compete to sell canning jars to American families. For the giant corporate descendants of those glass-jar makers, it’s not so clear that the 21st-century business model is any more lucrative than the legacy one.

Disabled no more

Vanishingly rare is the profitable, market-leading, stockholder-attuned, reasonably large, reasonably cheap business that would stand to gain by a rise in interest rates. This party to the mysteries of actuarial science and insurance accounting would seem to tick every box.

Credit Creation • Cause & Effect

October 14, 2016, Vol. 34, No. 19

'You get what you pay for'

Federally-mandated overhaul of the retirement-themed investment business promises a big boost to passive investing, which was doing fine without the government's imprimatur. Robotic disruption plus federal coercion makes a force to be reckoned with.

On the ETF divide

Battle of the bonds

In the great debate over interest rates at the fall 2016 Grant's conference, the scholarly bull and the newly fledged bear butted heads over more than the future of bond yields.
**Ed. note:
John H. Cochrane's, essay, “Inflation and Debt”, as mentioned in the issue. Click here to view.

They said it

What to do with money? A grand survey of the wit and wisdom dispensed by the Grant's speakers at The Pierre Hotel last week. "Almost everything that is particularly attractive is a little bit unusual."

Musk, Edison, Tesla

If you ever wondered where Elon Musk came from--what peculiar alignment of stars produced this protean creator, spender, borrower, innovator, printer of red ink, spinner of yarns and blower of deadlines--only look to the great Thomas Alva Edison, or, perhaps, to Edison's brilliant enemy and Musk's corporate namesake, Nikola Tesla.

Driving the automo-bezzle

Paper tigers

A new high in the prestige of modern central banks was recorded two Fridays ago when Britain waylaid the gold market. Without warning, Her Majesty’s government announced the sale of more than half of the U.K. gold reserve, formerly called “treasure.”

Sell Big Food

Monetary regime change

On August 30, at the annual monetary jamboree of the Kansas City Federal Reserve Bank in Jackson Hole, Wyo., Alan Greenspan washed his hands of responsibility for the bubble he said he could not have pricked even if he had noticed it floating above his desk on a string.

August 12, 2016, Vol. 34, No. 16

Send no money

Inventive minds resist the urge to capitulate at the alpine peaks and stygian depths of speculative markets. Rather, they adapt, sometimes with a twinkle in their eye. A no-risk, index-beating scheme for this sub-zero time.

Subject to revision

July 1, 2016, Vol. 34, No. 13

Monetary rule by the cargo cult

What with Brexit, the soft May durable goods report, collapsing bank stocks, the surging dollar exchange rate, the looming American presidential election, etc., the question is not so much when the Fed will raise its little funds rate as when it may cut it. Now unfolding is a speculation on the developing crisis in the Ph.D. standard of discretionary monetary management.

A selective panic

There was never a discriminating panic, but the post-Brexit markets outdid themselves. Are the algos quite sure about buying the sub-1%-yielding 10-year notes of the country with the bulging current-account deficit?

Inside Story

Thanks, Dodd-Frank

You don’t need a financial crisis to jack up repurchase rates nowadays. Congress has seen to that job all by itself. In the record books: The highest overnight general treasury repo rate since October 2008.

Waiter, the check

We are Metro

Washington’s subway system has been 50 years in the unmaking. Problems do not become less problematic simply on account of their being familiar, the editor of Grant’s reminded the Washington, D.C. Chartered Financial Analysts.

May 20, 2016, Vol. 34, No. 10

For monetary diversity

Transmission mechanism

A cyclical stock that dances to the beat of a cyclical industry (as well as to the cha-cha-cha of the Federal Open Market Committee). Now unfolding is a speculation about a profit-driven investment decline.

One and done

May 6, 2016, Vol. 34, No. 09

Paging George Champion

Before desk-top computers—before consultants—a worldwise banker laid in reserves against loan losses in the certain knowledge that credit experience is cyclical. What the great man could teach the Financial Accounting Standards Board.

April 22, 2016, Vol. 34, No. 08

The road to confetti

April 15 comes and goes but the federal debt stays and grows. The secrets of its life force are the topics at hand – that and how the upsurge in financial leverage, both public and private, may bear on the value of the dollar and on the course of monetary affairs.

No, not Treasurys

"Normalization is a good thing. Rates going up is a good thing. It's not a bad thing because we have a strong economy." The speaker is the chairman and CEO of JPMorgan Chase & Co., and the setting is the spring 2016 Grant's conference.

Business is hard

Our old flame became a bankrupt. Its road into Chapter 11 and its prospective road out again are the topics under discussion. Financial leverage, economic cycles, commodity prices, human foible and bad luck are the featured sub-topics.

February 26, 2016, Vol. 34, No. 04

Gyro Gearloose redux .

Buildings are tortoises

Real estate will not be hurried. Contracted rents, like skyscrapers, tend to stay put. Now in progress is an analysis of the relationship among stationary buildings, mobile financial markets and reluctant lenders.

Call in the safes

February 12, 2016, Vol. 34, No. 03

Next from the monetary kitchen

Negative nominal interest rates, helicopter money and the "cashless society" – like a play on tryout in New Haven, the ideas of the next phase of radical monetary control are getting a public airing before their Broadway debut.

January 29, 2016, Vol. 34, No. 02

Mr. Market, the merciless

There is no such thing as a separate and distinct “U.S. economy.” There is rather the single dollarized and financialized and over-leveraged worldwide economy. Like it or not, we are all in this together—the Chinese communists, the European socialists, the Japanese statists and we the people.

Oil & Son

Left hanging

The final sentence of the final article in the previous issue of Grant’s stopped just short of the period. Here it is, from beginning to end: “Let us not forget that Cowperthwaite was the architect of prosperity.”

2020 foresight

Neither fish nor fowl

A certain kind of hybrid security answers the needs of leveraged issuers and yield-starved investors alike. It offers incremental returns relative to senior bonds in the same capital structure. There must be something wrong with it.